Limoneira CO 10-Q

Item 1. Financial Statements LIMONEIRA COMPANY CONSOLIDATED BALANCE SHEETS (UNAUDITED) ($ in thousands, except share amounts) July 31, 2021 October 31, 2020 Assets Current assets: Cash $ 775 $ 501 Accounts receivable, net 16,427 16,261 Cultural costs 5,426 6,865 Prepaid expenses and other current assets 10,219 10,688 Receivables/other from related parties 4,687 2,294 Income taxes receivable — 5,911 Total current assets 37,534 42,520 Property, plant and equipment, net 244,900 242,649 Real estate development 22,251 21,636 Equity in investments 63,446 61,214 Goodwill 1,539 1,535 Intangible assets, net 8,680 11,309 Other assets 9,920 8,737 Total assets $ 388,270 $ 389,600 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 8,336 $ 5,838 Growers payable 10,328 8,126 Accrued liabilities 5,639 7,947 Payables to related parties 7,101 6,273 Current portion of long-term debt 2,236 3,277 Total current liabilities 33,640 31,461 Long-term liabilities: Long-term debt, less current portion 120,935 122,571 Deferred income taxes 23,526 22,430 Other long-term liabilities 6,374 6,568 Total liabilities 184,475 183,030 Commitments and contingencies (See Note 16) — — Series B Convertible Preferred Stock – $ 100.00 par value ( 50,000 shares authorized: 14,790 shares issued and outstanding at July 31, 2021 and October 31, 2020) ( 8.75 % coupon rate) 1,479 1,479 Series B-2 Convertible Preferred Stock – $ 100.00 par value ( 10,000 shares authorized: 9,300 shares issued and outstanding at July 31, 2021 and October 31, 2020) ( 4 % dividend rate on liquidation value of $ 1,000 per share) 9,331 9,331 Stockholders' Equity: Series A Junior Participating Preferred Stock – $ 0.01 par value ( 20,000 shares authorized: zero issued or outstanding at July 31, 2021 and October 31, 2020) — — Common Stock – $ 0.01 par value ( 39,000,000 shares authorized: 17,936,377 and 17,857,707 shares issued and 17,685,400 and 17,606,730 shares outstanding at July 31, 2021 and October 31, 2020, respectively) 179 179 Additional paid-in capital 163,460 162,084 Retained earnings 27,874 30,797 Accumulated other comprehensive loss ( 6,815 ) ( 7,548 ) Treasury stock, at cost, 250,977 shares at July 31, 2021 and October 31, 2020 ( 3,493 ) ( 3,493 ) Noncontrolling interest 11,780 13,741 Total stockholders' equity 192,985 195,760 Total liabilities and stockholders' equity $ 388,270 $ 389,600 The accompanying notes are an integral part of these unaudited consolidated financial statements. 4 LIMONEIRA COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) ($ in thousands, except share amounts) Three Months Ended July 31, Nine Months Ended July 31, 2021 2020 2021 2020 Net revenues: Agribusiness $ 47,954 $ 52,387 $ 129,080 $ 131,309 Other operations 1,171 1,172 3,452 3,477 Total net revenues 49,125 53,559 132,532 134,786 Costs and expenses: Agribusiness 40,691 46,826 114,071 125,318 Other operations 1,017 1,010 3,189 3,396 Selling, general and administrative 4,043 3,909 15,154 15,557 Total costs and expenses 45,751 51,745 132,414 144,271 Operating income (loss) 3,374 1,814 118 ( 9,485 ) Other income (expense): Interest income 211 — 279 — Interest expense, net of patronage dividends ( 574 ) ( 92 ) ( 1,062 ) ( 1,089 ) Equity in earnings of investments, net 1,462 832 2,471 341 Loss on stock in Calavo Growers, Inc. — — — ( 6,299 ) Other income, net 32 11 83 246 Total other income (expense) 1,131 751 1,771 ( 6,801 ) Income (loss) before income tax (provision) benefit 4,505 2,565 1,889 ( 16,286 ) Income tax (provision) benefit ( 1,335 ) ( 765 ) ( 1,122 ) 5,876 Net income (loss) 3,170 1,800 767 ( 10,410 ) Net loss attributable to noncontrolling interest 535 509 663 1,409 Net income (loss) attributable to Limoneira Company 3,705 2,309 1,430 ( 9,001 ) Preferred dividends ( 125 ) ( 125 ) ( 376 ) ( 376 ) Net income (loss) attributable to common stock $ 3,580 $ 2,184 $ 1,054 $ ( 9,377 ) Basic net income (loss) per common share $ 0.20 $ 0.12 $ 0.06 $ ( 0.54 ) Diluted net income (loss) per common share $ 0.20 $ 0.12 $ 0.06 $ ( 0.54 ) Weighted-average common shares outstanding-basic 17,461,000 17,623,000 17,439,000 17,607,000 Weighted-average common shares outstanding-diluted 18,243,000 18,497,000 17,439,000 17,607,000 The accompanying notes are an integral part of these unaudited consolidated financial statements. 5 LIMONEIRA COMPANY CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) (In thousands) Three Months Ended July 31, Nine Months Ended July 31, 2021 2020 2021 2020 Net income (loss) $ 3,170 $ 1,800 $ 767 $ ( 10,410 ) Other comprehensive (loss) income, net of tax: Foreign currency translation adjustments ( 1,042 ) 1,410 330 ( 476 ) Minimum pension liability adjustment, net of tax of $ 50 , $ 50 , $ 150 and $ 150 for the three and nine months ended July 31, 2021 and 2020, respectively. 135 135 403 330 Residual state tax effects on sale of equity securities — — — 140 Total other comprehensive (loss) income, net of tax ( 907 ) 1,545 733 ( 6 ) Comprehensive income (loss) 2,263 3,345 1,500 ( 10,416 ) Comprehensive loss attributable to noncontrolling interest 558 544 630 1,431 Comprehensive income (loss) attributable to Limoneira Company $ 2,821 $ 3,889 $ 2,130 $ ( 8,985 ) The accompanying notes are an integral part of these unaudited consolidated financial statements. 6 LIMONEIRA COMPANY CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND TEMPORARY EQUITY ($ in thousands) Stockholders' Equity Temporary Equity Common Stock Additional Paid-In Retained Accumulated Other Comprehensive Treasury Non- controlling Total Series B Preferred Series B-2 Preferred Shares Amount Capital Earnings (Loss) Income Stock Interest Equity Stock Stock Balance at October 31, 2020 17,606,730 $ 179 $ 162,084 $ 30,797 $ ( 7,548 ) $ ( 3,493 ) $ 13,741 $ 195,760 $ 1,479 $ 9,331 Dividends Common ($ 0.075 per share) — — — ( 1,324 ) — — — ( 1,324 ) — — Dividends Series B ($ 2.19 per share) — — — ( 32 ) — — — ( 32 ) — — Dividends Series B-2 ($ 10 per share) — — — ( 93 ) — — — ( 93 ) — — Stock compensation 125,190 1 1,066 — — — — 1,067 — — Exchange of common stock ( 46,993 ) ( 1 ) ( 700 ) — — — — ( 701 ) — — Net (loss) income — — — ( 4,208 ) — — 292 ( 3,916 ) — — Other comprehensive income, net of tax — — — — 929 — 39 968 — — Balance at January 31, 2021 17,684,927 $ 179 $ 162,450 $ 25,140 $ ( 6,619 ) $ ( 3,493 ) $ 14,072 $ 191,729 $ 1,479 $ 9,331 Dividends Common ($ 0.075 per share) — — — ( 1,327 ) — — — ( 1,327 ) — — Dividends Series B ($ 2.19 per share) — — — ( 33 ) — — — ( 33 ) — — Dividends Series B-2 ($ 10 per share) — — — ( 93 ) — — — ( 93 ) — — Stock compensation 473 — 570 — — — — 570 — — Net income (loss) — — — 1,933 — — ( 420 ) 1,513 — — Other comprehensive income, net of tax — — — — 711 — 17 728 — — Balance at April 30, 2021 17,685,400 $ 179 $ 163,020 $ 25,620 $ ( 5,908 ) $ ( 3,493 ) $ 13,669 $ 193,087 $ 1,479 $ 9,331 Dividends Common ($ 0.075 per share) — — — ( 1,326 ) — — — ( 1,326 ) — — Dividends Series B ($ 2.19 per share) — — — ( 32 ) — — — ( 32 ) — — Dividends Series B-2 ($ 10 per share) — — — ( 93 ) — — — ( 93 ) — — Stock compensation — — 440 — — — — 440 — — Noncontrolling interest adjustment — — — — — — ( 1,331 ) ( 1,331 ) — — Net income (loss) — — — 3,705 — — ( 535 ) 3,170 — — Other comprehensive loss, net of tax — — — — ( 907 ) — ( 23 ) ( 930 ) — — Balance at July 31, 2021 17,685,400 $ 179 $ 163,460 $ 27,874 $ ( 6,815 ) $ ( 3,493 ) $ 11,780 $ 192,985 $ 1,479 $ 9,331 7 LIMONEIRA COMPANY CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND TEMPORARY EQUITY (CONTINUED) Stockholders' Equity Temporary Equity Common Stock Additional Paid-In Retained Accumulated Other Comprehensive Treasury Non- controlling Total Series B Preferred Series B-2 Preferred Shares Amount Capital Earnings Loss Stock Interest Equity Stock Stock Balance at October 31, 2019 17,756,180 $ 178 $ 160,254 $ 53,089 $ ( 7,255 ) $ — $ 15,422 $ 221,688 $ 1,479 $ 9,331 Dividends Common ($ 0.075 per share) — — — ( 1,338 ) — — — ( 1,338 ) — — Dividends Series B ($ 2.19 per share) — — — ( 32 ) — — — ( 32 ) — — Dividends Series B-2 $ 10 per share) — — — ( 93 ) — — — ( 93 ) — — Stock compensation 112,841 1 828 — — — — 829 — — Exchange of common stock ( 11,314 ) — ( 213 ) — — — — ( 213 ) — — Net loss — — — ( 6,427 ) — — ( 477 ) ( 6,904 ) — — Other comprehensive (loss) income, net of tax — — — — ( 1,132 ) — 12 ( 1,120 ) — — Balance at January 31, 2020 17,857,707 $ 179 $ 160,869 $ 45,199 $ ( 8,387 ) $ — $ 14,957 $ 212,817 $ 1,479 $ 9,331 Dividends Common ($ 0.075 per share) — — — ( 1,341 ) — — — ( 1,341 ) — — Dividends Series B ($ 2.19 per share) — — — ( 32 ) — — — ( 32 ) — — Dividends Series B-2 ($ 10 per share) — — — ( 93 ) — — — ( 93 ) — — Stock compensation — — 358 — — — — 358 — — Noncontrolling interest adjustment — — — — — — ( 145 ) ( 145 ) — — Net loss — — — ( 4,883 ) — — ( 423 ) ( 5,306 ) — — Other comprehensive (loss) income, net of tax — — — — ( 419 ) — 1 ( 418 ) — — Balance at April 30, 2020 17,857,707 $ 179 $ 161,227 $ 38,850 $ ( 8,806 ) $ — $ 14,390 $ 205,840 $ 1,479 $ 9,331 Dividends Common ($ 0.075 per share) — — — ( 1,338 ) — — — ( 1,338 ) — — Dividends Series B ($ 2.19 per share) — — — ( 33 ) — — — ( 33 ) — — Dividends Series B-2 ($ 10 per share) — — — ( 93 ) — — — ( 93 ) — — Stock compensation — — 428 — — — — 428 — — Treasury shares ( 42,100 ) — — — — ( 562 ) — ( 562 ) — — Net (loss) income — — — 2,309 — — ( 509 ) 1,800 — — Other comprehensive loss, net of tax — — — — 1,545 — ( 35 ) 1,510 — — Balance at July 31, 2020 17,815,607 $ 179 $ 161,655 $ 39,695 $ ( 7,261 ) $ ( 562 ) $ 13,846 $ 207,552 $ 1,479 $ 9,331 The accompanying notes are an integral part of these unaudited consolidated financial statements. 8 LIMONEIRA COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands) Nine Months Ended July 31, 2021 2020 Operating activities Net income (loss) $ 767 $ ( 10,410 ) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 7,490 7,555 (Gain) or loss on disposals of assets ( 20 ) 519 Stock compensation expense 2,077 1,615 Non-cash lease expense 346 349 Equity in earnings of investments, net ( 2,471 ) ( 341 ) Deferred income taxes 1,122 ( 581 ) Loss on stock in Calavo Growers, Inc. — 6,299 Other, net 193 ( 19 ) Changes in operating assets and liabilities: Accounts receivable and receivables/other from related parties ( 2,301 ) ( 6,367 ) Cultural costs 1,430 1,118 Prepaid expenses and other current assets ( 494 ) ( 1,811 ) Income taxes receivable 5,911 ( 4,848 ) Other assets 52 108 Accounts payable and growers payable 4,731 ( 2,969 ) Accrued liabilities and payables to related parties ( 1,612 ) ( 1,472 ) Other long-term liabilities ( 419 ) ( 139 ) Net cash provided by (used in) operating activities 16,802 ( 11,394 ) Investing activities Capital expenditures ( 8,282 ) ( 8,189 ) Net proceeds from sales of assets 87 — Net proceeds from sale of stock in Calavo Growers, Inc. — 11,048 Loan to Limoneira Lewis Community Builders, LLC — ( 1,800 ) Collection on loan and note receivable 25 1,800 Equity investment contributions — ( 2,800 ) Cash distribution from equity investment 106 — Investments in mutual water companies and water rights ( 652 ) ( 55 ) Insurance proceeds received — 250 Net cash (used in) provided by investing activities ( 8,716 ) 254 Financing activities Borrowings of long-term debt 69,682 94,080 Repayments of long-term debt ( 72,438 ) ( 77,363 ) Dividends paid – common ( 3,977 ) ( 4,017 ) Dividends paid – preferred ( 376 ) ( 376 ) Exchange of common stock ( 700 ) ( 213 ) Purchase of treasury stock — ( 562 ) Payments of deferred financing costs — ( 70 ) Net cash (used in) provided by financing activities ( 7,809 ) 11,479 Effect of exchange rate changes on cash ( 3 ) ( 77 ) Net increase in cash 274 262 Cash at beginning of period 501 616 Cash at end of period $ 775 $ 878 9 LIMONEIRA COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (CONTINUED) (In thousands) Nine Months Ended July 31, 2021 2020 Supplemental disclosures of cash flow information Cash paid during the period for interest, net of amounts capitalized $ 1,340 $ 1,666 Cash received during the period for income taxes, net $ 5,942 $ 361 Non-cash investing and financing activities: Capital expenditures accrued but not paid at period-end $ 437 $ 2,806 The accompanying notes are an integral part of these unaudited consolidated financial statements. 10 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. Organization and Basis of Presentation Business Limoneira Company (together with its consolidated subsidiaries, the “Company”) engages primarily in growing citrus and avocados, picking and hauling citrus, and packing, marketing and selling lemons. The Company is also engaged in residential rentals and other rental operations and real estate development activities. The Company markets and sells lemons directly to food service, wholesale and retail customers throughout the United States, Canada, Asia, Europe and other international markets. The Company is a member of Sunkist Growers, Inc. (“Sunkist”), an agricultural marketing cooperative, and sells its oranges, specialty citrus and other crops to Sunkist-licensed and other third-party packinghouses. The Company sells the majority of its avocado production to Calavo Growers, Inc. (“Calavo”), a packing and marketing company listed on the NASDAQ Global Select Market under the symbol CVGW. Calavo’s customers include many of the largest retail and food service companies in the United States and Canada. Calavo packs the Company’s avocados, which are then sold and distributed under Calavo brands to its customers. Basis of Presentation and Preparation The accompanying unaudited interim consolidated financial statements include the accounts of the Company and the accounts of all the subsidiaries and investments in which the Company holds a controlling interest. Intercompany accounts and transactions have been eliminated. In the opinion of the Company, the unaudited interim consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. The preparation of these unaudited interim consolidated financial statements and accompanying notes in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ materially from those estimates. Certain information and footnote disclosures normally included in the annual consolidated financial statements have been condensed or omitted pursuant to the rules and regulations of the SEC. Because the consolidated financial statements do not include all of the information and notes required by GAAP for a complete set of consolidated financial statements, they should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K. 2. Summary of Significant Accounting Policies Comprehensive Income (Loss) Comprehensive income (loss) represents all changes in a company’s net assets, except changes resulting from transactions with stockholders. Other comprehensive income or loss primarily includes foreign currency translation items and defined benefit pension items. Accumulated other comprehensive (loss) income is reported as a component of the Company's stockholders' equity. The following tables summarizes the changes in other comprehensive (loss) income by component (in thousands): Three Months Ended July 31, 2021 2020 Pre-tax Amount Tax Expense Net Amount Pre-tax Amount Tax Expense Net Amount Foreign currency translation adjustments $ ( 1,042 ) $ — $ ( 1,042 ) $ 1,410 $ — $ 1,410 Minimum pension liability adjustments: Other comprehensive gain before reclassifications 185 ( 50 ) 135 185 ( 50 ) 135 Other comprehensive (loss) income $ ( 857 ) $ ( 50 ) $ ( 907 ) $ 1,595 $ ( 50 ) $ 1,545 11 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 2. Summary of Significant Accounting Policies (continued) Nine Months Ended July 31, 2021 2020 Pre-tax Amount Tax Expense Net Amount Pre-tax Amount Tax Expense Net Amount Foreign currency translation adjustments $ 330 $ — $ 330 $ ( 476 ) $ — $ ( 476 ) Minimum pension liability adjustments: Other comprehensive gain before reclassifications 553 ( 150 ) 403 480 ( 150 ) 330 Available-for-sale securities: Amounts reclassified to earnings included in "Selling, general and administrative" — — — — 140 140 Other comprehensive income (loss) $ 883 $ ( 150 ) $ 733 $ 4 $ ( 10 ) $ ( 6 ) The following table summarizes the changes in accumulated other comprehensive (loss) income by component (in thousands): Foreign Currency Translation (Loss) Income Defined Benefit Pension Plan Available-for-Sale Securities Accumulated Other Comprehensive (Loss) Income Balance as of October 31, 2020 $ ( 3,069 ) $ ( 4,479 ) $ — $ ( 7,548 ) Other comprehensive income 330 403 — 733 Balance as of July 31, 2021 $ ( 2,739 ) $ ( 4,076 ) $ — $ ( 6,815 ) Foreign Currency Translation Loss Defined Benefit Pension Plan Available-for-Sale Securities Accumulated Other Comprehensive Loss Balance as of October 31, 2019 $ ( 2,362 ) $ ( 4,753 ) $ ( 140 ) $ ( 7,255 ) Other comprehensive (loss) income ( 476 ) 330 140 ( 6 ) Balance as of July 31, 2020 $ ( 2,838 ) $ ( 4,423 ) $ — $ ( 7,261 ) Recent Accounting Pronouncements FASB ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and related ASUs This amendment requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. ASU 2016-13 is effective for SEC filers for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company adopted this ASU effective November 1, 2020 and the adoption did not have a material impact on its consolidated financial statements. FASB ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity This amendment simplifies accounting for convertible instruments by removing major separation models currently required under GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument and more convertible preferred stock as a single equity instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it. The ASU also simplifies the diluted earnings per share (EPS) calculation in certain areas. ASU 2020-06 is effective for public business entities that meet the definition of a SEC filer for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2020. The Company is evaluating the effect this ASU may have on its consolidated financial statements. 12 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 3. Concentrations and Geographic Information Lemons procured from third-party growers were 57 % and 64 % of the Company's lemon supply in the three months ended July 31, 2021 and 2020, respectively, and were 51 % and 60 % of the Company's lemon supply in the nine months ended July 31, 2021 and 2020, respectively, of which one third-party grower was 10 % of the lemon supply for the nine months ended July 31, 2021. The Company sells the majority of its avocado production to Calavo and sells a majority of its oranges and specialty citrus to a third-party packinghouse. Concentrations of credit risk with respect to revenues and account receivables are limited due to a large, diverse customer base. Two individual customers represented 17 % and 13 % of revenues, respectively, for the nine months ended July 31, 2021. No individual customer represented more than 10% of accounts receivable, net as of July 31, 2021. During the three months ended July 31, 2021 and 2020, the Company had approximately $ 578,000 and $ 643,000 , respectively, of total sales in Chile by Fruticola Pan de Azucar S.A. ("PDA") and Agricola San Pablo SpA ("San Pablo"). During the nine months ended July 31, 2021 and 2020, the Company had approximately $ 2,555,000 and $ 2,103,000 , respectively, of total sales in Chile by PDA and San Pablo. In June 2021, the Company entered into an agreement, effective March 1, 2021, to sell and license certain assets of Trapani Fresh to its 49 % partner in the joint venture, FGF Trapani ("FGF"). These assets consist of packing supplies and certain intangible assets related to the packing, marketing, and selling business of Trapani Fresh. The total consideration to be received is approximately $ 3,900,000 over an 8-year term in 16 equal installments. Payments to be received are secured by FGF’s interest in land parcels at the Santa Clara ranch and consist of a $ 1,200,000 note receivable and $ 2,700,000 of royalty payments. There was no material gain or loss recognized on the transaction. Trapani Fresh continues to own and operate the 1,200 -acre Santa Clara ranch and now sells the lemons it grows to FGF, who packs, markets, and sells the fruit to its export customers. As a result of this transaction, Trapani Fresh now recognizes lemon revenues at the market price less packinghouse charges to harvest, pack and market the fruit. During the three months ended July 31, 2021 and 2020, the Company had approximately $ 710,000 and $ 9,626,000 , respectively, of total sales in Argentina by Trapani Fresh. During the nine months ended July 31, 2021 and 2020, the Company had approximately $ 3,265,000 and $ 12,105,000 , respectively, of total sales in Argentina by Trapani Fresh. Aggregate foreign exchange transaction losses realized for our foreign subsidiaries was approximately $ 598,000 for the nine months ended July 31, 2021 and are included in selling, general and administrative expenses in the consolidated statements of operations. Foreign exchange transaction gains/losses were immaterial for the nine months ended July 31, 2020. 4. Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consist of the following (in thousands): July 31, 2021 October 31, 2020 Prepaid supplies and insurance $ 2,634 $ 2,080 Note receivable and related interest 2,446 2,490 Real estate development held for sale 2,543 2,543 Sales tax receivable 807 1,867 Lemon supplier advances and other 1,789 1,708 $ 10,219 $ 10,688 5. Real Estate Development Real estate development assets are comprised primarily of land and land development costs and consist of the following (in thousands): July 31, 2021 October 31, 2020 Retained Property - East Area I $ 13,011 $ 13,169 East Area II 9,240 8,467 $ 22,251 $ 21,636 13 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 5. Real Estate Development (continued) East Area I, Retained Property and East Area II In fiscal year 2005, the Company began capitalizing the costs of two real estate development projects east of Santa Paula, California, for the development of 550 acres of land into residential units, commercial buildings and civic facilities. On November 10, 2015 (the “Transaction Date”), the Company entered into a joint venture with The Lewis Group of Companies (“Lewis”) for the residential development of its East Area I real estate development project. To consummate the transaction, the Company formed Limoneira Lewis Community Builders, LLC (“LLCB” or “Joint Venture”) as the development entity, contributed its East Area I property to LLCB and sold a 50 % interest in LLCB to Lewis for $ 20,000,000 . The Company and the Joint Venture also entered into a Retained Property Development Agreement on the Transaction Date (the "Retained Property Agreement"). Under the terms of the Retained Property Agreement, the Joint Venture transferred certain contributed East Area I property, which is entitled for commercial development, back to the Company (the "Retained Property") and arranged for the design and construction of certain improvements to the Retained Property, subject to certain reimbursements by the Company. The balance in Retained Property and East Area II includes estimated costs incurred by and reimbursable to LLCB of $ 5,600,000 and $ 5,300,000 at July 31, 2021 and October 31, 2020, respectively, which is included in payables to related parties. In January 2018, the Joint Venture entered into a $ 45,000,000 unsecured Line of Credit Loan Agreement and Promissory Note (the “Loan”) with Bank of America, N.A. to fund early development activities. The Loan originally was scheduled to mature in January 2020 and was extended to February 22, 2021. In February 2021, this loan was extended to February 22, 2023 with an option to extend to February 22, 2024, subject to certain conditions. The interest rate on the Loan is LIBOR plus 2.85 % and is payable monthly. The Loan contains certain customary default provisions and the Joint Venture may prepay any amounts outstanding under the Loan without penalty. The Joint Venture had an outstanding balance of zero as of July 31, 2021. In February 2018, certain principals from Lewis and by the Company guaranteed the obligations under the Loan. The guarantee shall continue in effect until all of the Loan obligations are fully paid and the guarantors are jointly and severally liable for all Loan obligations in the event of default by the Joint Venture. The $ 1,080,000 estimated value of the guarantee was recorded in the Company’s consolidated balance sheets and is included in other long-term liabilities with a corresponding value in equity in investments. The extension had no impact on the Company's Loan guarantee value. Additionally, a Reimbursement Agreement was executed between the Lewis guarantors and the Company, which provides for unpaid liabilities of the Joint Venture to be shared pro-rata by the Lewis guarantors and the Company in proportion to their percentage interest in the Joint Venture. The Company made contributions to the Joint Venture of zero and $ 2,800,000 in the nine months ended July 31, 2021 and 2020, respectively. Through July 31, 2021, the Joint Venture has closed the sales of the initial residential lots representing 556 residential units. Other Real Estate Development Projects The remaining real estate development parcel within the Templeton Santa Barbara, LLC project is described as Sevilla. In the first quarter of fiscal year 2020, the Company entered into an agreement to sell its Sevilla property for $ 2,700,000 , which is expected to close in calendar year 2021. After transaction and other costs, the Company expects to receive cash proceeds of approximately $ 2,550,000 and recognize an immaterial gain upon closing. At July 31, 2021, the $ 2,543,000 carrying value of the property was classified as held for sale and included in prepaid expenses and other current assets. During December 2017, the Company sold its Centennial property with a net book value of $ 2,983,000 for $ 3,250,000 . The Company received cash and a $ 3,000,000 promissory note secured by the property for the balance of the purchase. The promissory note was originally scheduled to mature in December 2019 but was extended to December 15, 2020 and the interest rate was reset to equal to the 6-month LIBOR plus 2.75 % on the outstanding principal balance of the note, interest only paid monthly on the first day of each month beginning January 1, 2020. In September 2020, the promissory note was further extended to June 15, 2021 on the same terms and conditions upon making a principal paydown of $ 25,000 , which was paid in November 2020, with an option to further extend the maturity date of the promissory note to December 15, 2021 on the same terms and conditions and upon making an additional principal paydown of $ 25,000 . The option was exercised and the extension payment was paid in May 2021. At July 31, 2021, the net carrying value of the note was $ 2,600,000 and classified in prepaid expenses and other current assets. 14 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 6. Equity in Investments Equity in investments consist of the following (in thousands): July 31, 2021 October 31, 2020 Limoneira Lewis Community Builders, LLC $ 59,844 $ 57,142 Limco Del Mar, Ltd. 2,027 1,920 Rosales 1,066 1,641 Romney Property Partnership 509 511 $ 63,446 $ 61,214 Unconsolidated Significant Subsidiary In accordance with Rule 10-01(b)(1) of Regulation S-X, which applies to interim reports on Form 10-Q, the Company must determine if its equity method investees are considered “significant subsidiaries." In evaluating its investments, there are two tests utilized to determine if equity method investees are considered significant subsidiaries: the income test and the investment test. Summarized income statement information of an equity method investee is required in an interim report if either of the two tests exceed 20% in the interim periods presented. During the year-to-date interim period for the nine months ended July 31, 2021, this threshold was met for the Company's equity investment in LLCB. The following is unaudited summarized financial information for LLCB (in thousands): Nine Months Ended July 31, 2021 2020 Revenues $ 36,684 $ 25,716 Cost of land sold 28,062 21,614 Operating expenses 634 848 Net income $ 7,988 $ 3,254 Net income attributable to Limoneira Company $ 3,944 $ 1,659 7. Goodwill and Intangible Assets, Net A summary of the change in the carrying amount of goodwill is as follows (in thousands): Goodwill Carrying Amount Balance at October 31, 2020 $ 1,535 Foreign currency translation adjustment 4 Balance as of July 31, 2021 $ 1,539 Goodwill is tested for impairment on an annual basis or when an event or changes in circumstances indicate that its carrying value may not be recoverable. There have been no impairment charges recorded against goodwill as of July 31, 2021. During the nine months ended July 31, 2021, the Company acquired additional water rights in Chile for $ 186,000 . 15 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 7. Goodwill and Intangible Assets, Net (continued) Intangible assets consisted of the following as of July 31, 2021 and October 31, 2020 (in thousands): July 31, 2021 October 31, 2020 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Weighted Average Useful Life in Years Gross Carrying Amount Accumulated Amortization Net Carrying Amount Weighted Average Useful Life in Years Trade names and trademarks $ 2,108 $ ( 673 ) $ 1,435 8 $ 3,771 $ ( 947 ) $ 2,824 10 Customer relationships 4,037 ( 1,019 ) 3,018 9 5,010 ( 989 ) 4,021 9 Non-competition agreement 437 ( 9 ) 428 8 1,040 ( 147 ) 893 10 Acquired water and mineral rights 3,799 — 3,799 Indefinite 3,571 — 3,571 Indefinite $ 10,381 $ ( 1,701 ) $ 8,680 $ 13,392 $ ( 2,083 ) $ 11,309 Amortization expense totaled $ 210,000 and $ 262,000 for the three months ended July 31, 2021 and 2020, respectively. Amortization expense totaled $ 736,000 and $ 752,000 for the nine months ended July 31, 2021 and 2020, respectively. Estimated future amortization expense of intangible assets as of July 31, 2021 are as follows (in thousands): 2021 (excluding the nine months ended July 31, 2021) $ 192 2022 724 2023 724 2024 716 2025 711 Thereafter 1,814 $ 4,881 8. Other Assets Investments in Mutual Water Companies The Company’s investments in various not-for-profit mutual water companies provide the Company with the right to receive a proportionate share of water from each of the not-for-profit mutual water companies that have been invested in and do not constitute voting shares and/or rights. Amounts included in other assets in the consolidated balance sheets as of July 31, 2021 and October 31, 2020 were $ 5,990,000 and $ 5,563,000 , respectively. 9. Accrued Liabilities Accrued liabilities consist of the following (in thousands): July 31, 2021 October 31, 2020 Compensation $ 2,295 $ 2,275 Property taxes 196 683 Lemon and orange supplier payables — 1,346 Operating expenses 1,452 938 Leases 315 959 Other 1,381 1,746 $ 5,639 $ 7,947 16 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 10. Long-Term Debt Long-term debt is comprised of the following (in thousands): July 31, 2021 October 31, 2020 Farm Credit West revolving and non-revolving lines of credit: the interest rate of the revolving line of credit is variable based on the one-month London Interbank Offered Rate (“LIBOR”), which was 0.10 % at July 31, 2021, plus 1.75 %. The interest rate for the $ 40.0 million outstanding balance of the non-revolving line of credit is fixed at 4.77 % through July 1, 2022, 3.57 % through July 1, 2025 and variable thereafter. Interest is payable monthly and the principal is due in full on July 1, 2026. $ 101,802 $ 102,251 Farm Credit West term loan: Effective July 1, 2020, the interest rate was fixed at 2.48 %. The loan is payable in quarterly installments through November 2022. 968 1,438 Farm Credit West term loan: Effective July 1, 2020, the interest rate was fixed at 3.24 %. The loan is payable in monthly installments through October 2035. 988 1,029 Farm Credit West term loan: Effective July 1, 2020, the interest rate was fixed at 3.24 %. The loan is payable in monthly installments through March 2036. 8,112 8,433 Farm Credit West term loan: Effective July 1, 2020 the interest rate was fixed at 2.77 % until July 1, 2025, becoming variable for the remainder of the loan. The loan is payable in monthly installments through March 2036. 5,975 6,220 Wells Fargo term loan: the interest rate is fixed at 3.58 %. The loan is payable in monthly installments through January 2023. 2,486 3,491 Banco de Chile term loan: the interest rate is fixed at 6.48 %. The loan is payable in annual installments through January 2025. 1,071 1,205 Note Payable: the interest rate ranges from 5.00 % to 7.00 % and was 6.50 % at July 31, 2021. The loan includes interest only monthly payments and principal is due in February 2023. 1,435 1,435 Banco de Chile COVID-19 loans: The interest rates are fixed at 3.48 % and 2.90 %. The loans are payable in monthly installments beginning February 2021 through September 2024. 477 522 Subtotal 123,314 126,024 Less deferred financing costs, net of accumulated amortization 143 176 Total long-term debt, net 123,171 125,848 Less current portion 2,236 3,277 Long-term debt, less current portion $ 120,935 $ 122,571 In June 2021, the Company entered into a Master Loan Agreement (the “MLA”) with Farm Credit West, PCA (the “Lender”) dated June 1, 2021, together with a revolving credit facility supplement (the “Revolving Credit Supplement”), a non-revolving credit facility supplement (the “Non-Revolving Credit Supplement,” and together with the Revolving Credit Supplement, the “Supplements”) and an agreement to convert to fixed interest rate ("Fixed Interest Rate Agreement"). The MLA governs the terms of the Supplements. The MLA amends and restates the previous Master Loan Agreement between the Company and the Lender, dated June 19, 2017 and extends the principal repayment to July 1, 2026. Debt financing costs related to the MLA agreement were immaterial. In June 2020, the Company and Farm Credit West entered into a Conversion Agreement to convert the term loans noted above to fixed interest rate loans effective July 1, 2020. No changes were made to the outstanding principal balances on the term loans and the Company made no cash repayments of principal. The rates were subject to a prepayment restriction period for a portion of the fixed rate term that expired on January 1, 2021. The Company may prepay any amounts without penalty. In March 2020, the Company entered into a revolving equity line of credit promissory note and loan agreement with Farm Credit West for a $ 15,000,000 Revolving Equity Line of Credit (the "RELOC") secured by a first lien on the Windfall Investors, LLC property. The RELOC matures in 2043 and features a 3 -year draw period followed by 20 years of fully amortized loan payments. The interest rate is variable with monthly interest-only payments during the 3 -year draw period and monthly principal and interest payments thereafter. The Supplements and RELOC provide aggregate borrowing capacity of $ 130,000,000 comprised of $ 75,000,000 under the Revolving Credit Supplement, $ 40,000,000 under the Non-Revolving Credit Supplement and $ 15,000,000 under the RELOC. The borrowing capacity based on collateral value was $ 130,000,000 at July 31, 2021, of which $ 28,198,000 was available to borrow. For amounts outstanding under both Supplements interest will begin to be charged on the date the Lender disburses principal and will continue until the outstanding indebtedness under the Supplements is paid in full with interest. 17 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 10. Long-Term Debt (continued) The initial interest rate in effect under the Revolving Credit Supplement was 1.69 % per annum, and was automatically adjusted commencing July 1, 2021 and on the first day of each month thereafter. The interest rate for any amount outstanding under the Revolving Credit Supplement will be based on the one-month LIBOR rate plus or minus an applicable margin. The applicable margin will range from 1.75 % to 2.35 % depending on the ratio of current assets, plus the remaining available commitment divided by current liabilities. On July 1, 2022, and on each one-year anniversary thereafter, the Company has the option to convert the interest rate in use under the Revolving Credit Supplement from the preceding LIBOR-based calculation to a variable interest rate. Any amounts outstanding under the Revolving Credit Supplement will be due and payable in full on July 1, 2026. The Company may prepay any amounts outstanding under the Revolving Credit Supplement without penalty. The initial interest rate in effect under the Non-Revolving Credit Supplement is a fixed interest rate of 4.77 % per year and such rate shall continue for a period of one year and one month. Pursuant to the Fixed Interest Rate Agreement, the Non-Revolving Credit Supplement will convert to a fixed interest rate of 3.57 % per year until July 1, 2025 (the “Fixed Rate Term”). Thereafter, the interest rate will convert to a variable interest rate established by the Lender corresponding to the corresponding interest rate group. Any amounts outstanding under the Non-Revolving Credit Supplement is due and payable in full on July 1, 2026. The Company may not prepay any amounts under the outstanding Non-Revolving Credit Supplement during the Fixed Rate Term. Thereafter, the Company may prepay any amounts outstanding under the Non-Revolving Credit Supplement, provided that a fee equal to 0.50 % of the amount prepaid and any other cost or loss suffered by the Lender must be paid with any prepayment. All indebtedness under the MLA and RELOC, including any indebtedness under the Supplements, is secured by a first lien on Company-owned stock or participation certificates, Company funds maintained with Lender, Lender’s unallocated surplus, and certain of the Company’s agricultural properties in Tulare and Ventura counties in California and certain of the Company’s building fixtures and improvements and investments in mutual water companies associated with the pledged agricultural properties. The MLA includes customary default provisions that provide should an event of default occur, the Lender, at its option, may declare all or any portion of the indebtedness under the MLA to be immediately due and payable without demand, notice of non-payment, protest or prior recourse to collateral, and terminate or suspend the Company’s right to draw or request funds on any loan or line of credit. The MLA subjects the Company to affirmative and restrictive covenants including, among other customary covenants, financial reporting requirements, requirements to maintain and repair any collateral, restrictions on the sale of assets, restrictions on the use of proceeds, prohibitions on the incurrence of additional debt and restrictions on the purchase or sale of major assets of the Company’s business. The Company is also subject to a covenant that it will maintain a debt service coverage ratio greater than or equal to 1.15 :1.00 measured at October 31, 2021, and greater than or equal to 1.25 :1 when measured at October 31, 2022, and annually thereafter. In August 2021, the Lender modified the covenant to a minimum debt service coverage ratio greater than or equal to 1.0 :1.0 measured at October 31, 2021. In August 2021, the Company entered into an equipment finance agreement (a "FCW term loan") with Lender in the amount of $ 2,508,000 and used the proceeds to payoff the Wells Fargo term loan. The FCW term loan has a fixed interest rate of 3.19 % and is payable in monthly installments through September 2026. There were no unamortized debt financing costs related to the Wells Fargo term loan and no capitalized financing costs related to the FCW term loan. In December 2020, Farm Credit West declared an annual cash patronage dividend of 1.50 % of average eligible loan balances. The Company received $ 1,170,000 in February 2021. Interest is capitalized on non-bearing orchards, real estate development projects and significant construction in progress. The Company capitalized interest of $ 353,000 and $ 353,000 during the three months ended July 31, 2021 and 2020, respectively, and $ 661,000 and $ 797,000 during the nine months ended July 31, 2021 and 2020, respectively. Capitalized interest is included in property, plant and equipment and real estate development assets in the Company’s consolidated balance sheets. 11. Leases Lessor Arrangements The Company enters into leasing transactions in which it rents certain of its assets and the Company is the lessor. These lease contracts are typically classified as operating leases with remaining terms ranging from one month to 22 years, with various renewal terms available. All of the residential rentals have month to month lease terms. 18 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 11. Leases (continued) Lessor Arrangements (continued) The Company’s rental operations revenue consists of the following (in thousands): Three Months Ended July 31, Nine Months Ended July 31, 2021 2020 2021 2020 Operating lease revenue $ 1,086 $ 1,078 $ 3,215 $ 3,235 Variable lease revenue 85 94 237 242 Total lease revenue $ 1,171 $ 1,172 $ 3,452 $ 3,477 Lessee Arrangements The Company enters into leasing transactions in which the Company is the lessee. These lease contracts are typically classified as operating leases. The Company’s lease contracts are generally for agricultural land and packinghouse equipment with remaining lease terms ranging from one to 17 years, with various term extensions available. The Company’s lease agreements do not contain any residual value guarantees or material restrictive covenants. Leases with an initial term of 12 months or less are not recorded on the balance sheet and the Company recognizes lease expense for these leases on a straight-line basis over the lease term. As of July 31, 2021, there were no material finance leases for which the Company was a lessee. Operating lease costs were $ 128,000 and $ 143,000 for the three months ended July 31, 2021 and 2020, respectively, and $ 406,000 and $ 417,000 for the nine months ended July 31, 2021 and 2020, respectively, which are primarily included in agribusiness costs and expenses in the Company’s consolidated statements of operations. Variable and short term lease costs were immaterial. Supplemental balance sheet information related to leases consists of the following (in thousands): Classification July 31, 2021 October 31, 2020 Assets Operating lease ROU assets Other assets $ 1,978 $ 2,053 Liabilities and Stockholders' Equity Current operating lease liabilities Accrued liabilities and payables to related parties 449 521 Non-current operating lease liabilities Other long-term liabilities 1,592 1,610 Total operating lease liabilities $ 2,041 $ 2,131 Supplemental cash flow information related to leases consists of the following (in thousands): Three Months Ended July 31, Nine Months Ended July 31, 2021 2020 2021 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash outflows from operating leases $ 112 $ 126 $ 422 $ 432 ROU assets obtained in exchange for new operating lease liabilities $ — $ 108 $ 271 $ 108 19 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 12. Basic and Diluted Net Income (Loss) per Share Basic net income (loss) per common share is calculated using the weighted-average number of common shares outstanding during the period without consideration of the dilutive effect of conversion of preferred stock. Diluted net income (loss) per common share is calculated using the weighted-average number of common shares outstanding during the period plus the dilutive effect of conversion of unvested, restricted stock and preferred stock. The computations for basic and diluted net income (loss) per common share are as follows (in thousands, except per share amounts): Three Months Ended July 31, Nine Months Ended July 31, 2021 2020 2021 2020 Basic net income (loss) per common share: Net income (loss) applicable to common stock $ 3,580 $ 2,184 $ 1,054 $ ( 9,377 ) Effect of unvested, restricted stock ( 15 ) ( 17 ) ( 50 ) ( 50 ) Numerator: Net income (loss) for basic EPS 3,565 2,167 1,004 ( 9,427 ) Denominator: Weighted average common shares-basic 17,461 17,623 17,439 17,607 Basic net income (loss) per common share $ 0.20 $ 0.12 $ 0.06 $ ( 0.54 ) Diluted net income (loss) per common share: Numerator: Net income (loss) for diluted EPS $ 3,705 $ 2,309 $ 1,004 $ ( 9,427 ) Weighted average common shares–basic 17,461 17,623 17,439 17,607 Effect of dilutive unvested, restricted stock and preferred stock 782 874 — — Denominator: Weighted average common shares–diluted 18,243 18,497 17,439 17,607 Diluted net income (loss) per common share $ 0.20 $ 0.12 $ 0.06 $ ( 0.54 ) Diluted earnings (losses) per common share are computed using the more dilutive method of either the two-class method or the treasury stock method. Unvested stock-based compensation awards that contain non-forfeitable rights to dividends as participating shares are included in computing earnings per share. The Company’s unvested, restricted stock awards qualify as participating shares. The Company excluded 147,000 and 225,000 , unvested, restricted shares, as calculated under the treasury stock method, from its computation of diluted earnings (losses) per share for the three months ended July 31, 2021 and 2020, respectively, and 146,000 and 187,000 for the nine months ended July 31, 2021 and 2020, respectively. 13. Related-Party Transactions The Company has transactions with various related-parties as summarized in the tables below (in thousands): July 31, 2021 October 31, 2020 Balance Sheet Balance Sheet Ref Related Party Receivable/Other from Related Parties Other Assets Payables to Related Parties Other Long-Term Liabilities Receivable/Other from Related Parties Other Assets Payables to Related Parties Other Long-Term Liabilities 2 Mutual water companies $ — $ 427 $ 92 $ — $ — $ 64 $ 64 $ — 3 Cooperative association $ — $ — $ 42 $ — $ — $ — $ 123 $ — 4 Calavo $ 887 $ — $ — $ — $ — $ — $ — $ — 5 Cadiz / Fenner / WAM $ — $ 1,386 $ 194 $ 1,297 $ — $ 1,443 $ 182 $ 1,353 6 Colorado River Growers $ — $ — $ — $ — $ 81 $ — $ — $ — 8 FGF $ 3,800 $ 980 $ 1,111 $ — $ 2,213 $ — $ 604 $ — 9 LLCB $ — $ — $ 5,600 $ — $ — $ — $ 5,300 $ — 11 Third party growers $ — $ — $ 62 $ — $ — $ — $ — $ — 20 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 13. Related-Party Transactions (continued) Three Months Ended July 31, 2021 Three Months Ended July 31, 2020 Consolidated Statement of Operations Consolidated Statement of Operations Ref Related Party Net Revenue Agribusiness Net Revenue Rental Operations Agribusiness Expense and Other Dividends Paid Net Revenue Agribusiness Net Revenue Rental Operations Agribusiness Expense and Other Other Income, Net Dividends Paid 1 Employees $ — $ 204 $ — $ — $ — $ 195 $ — $ — $ — 2 Mutual water companies $ — $ — $ 274 $ — $ — $ — $ 211 $ — $ — 3 Cooperative association $ — $ — $ 652 $ — $ — $ — $ 353 $ — $ — 4 Calavo $ 4,036 $ 80 $ 408 $ 126 $ 4,724 $ 84 $ 23 $ — $ 126 5 Cadiz / Fenner / WAM $ — $ — $ 36 $ — $ — $ — $ 1 $ — $ — 8 FGF $ 710 $ — $ 1,761 $ — $ 9,926 $ — $ 10,508 $ — $ — 10 Freska $ 23 $ — $ — $ — $ — $ — $ — $ — $ — 11 Third party growers $ — $ — $ 16 $ — $ — $ — $ — $ — $ — Nine Months Ended July 31, 2021 Nine Months Ended July 31, 2020 Consolidated Statement of Operations Consolidated Statement of Operations Ref Related Party Net Revenue Agribusiness Net Revenue Rental Operations Agribusiness Expense and Other Dividends Paid Net Revenue Agribusiness Net Revenue Rental Operations Agribusiness Expense and Other Other Income, Net Dividends Paid 1 Employees $ — $ 608 $ — $ — $ — $ 585 $ — $ — $ — 2 Mutual water companies $ — $ — $ 879 $ — $ — $ — $ 675 $ — $ — 3 Cooperative association $ — $ — $ 1,178 $ — $ — $ — $ 1,246 $ — $ — 4 Calavo $ 6,589 $ 237 $ 688 $ 377 $ 6,296 $ 249 $ 200 $ 220 $ 377 5 Cadiz / Fenner / WAM $ — $ — $ 271 $ — $ — $ — $ 173 $ — $ — 6 Colorado River Growers $ 157 $ — $ 2,772 $ — $ 522 $ — $ 5,337 $ — $ — 7 YMIDD $ — $ — $ 62 $ — $ — $ — $ 86 $ — $ — 8 FGF $ 3,265 $ — $ 2,989 $ — $ 12,105 $ — $ 12,941 $ — $ — 10 Freska $ 119 $ — $ 142 $ — $ — $ — $ — $ — $ — 11 Third party growers $ — $ — $ 132 $ — $ — $ — $ — $ — $ — (1) Employees - The Company rents certain of its residential housing assets to employees on a month-to-month basis and recorded rental income from employees. There were no rental payments due from employees at July 31, 2021 or October 31, 2020. (2) Mutual water companies - The Company has representation on the boards of directors of the mutual water companies in which the Company has investments, refer to Note 8 - Other Assets. The Company recorded capital contributions, purchased water and water delivery services and had water payments due to the mutual water companies. (3) Cooperative association - The Company has representation on the board of directors of a non-profit cooperative association that provides pest control services for the agricultural industry. The Company purchased services and supplies from and had payments due to the cooperative association. (4) Calavo - The Company had an investment in Calavo through March 2020 and has representation on the board of directors and Calavo has an investment in the Company. The Company recorded dividend income on its investment in Calavo, paid dividends to Calavo and had avocado sales to Calavo. Additionally, the Company leases office space to Calavo, purchased storage services from Calavo and had immaterial amounts due to Calavo for those services. 21 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 13. Related-Party Transactions (continued) (5) Cadiz / Fenner / WAM - A member of the Company’s board of directors serves as the CEO, President and a member of the board of directors of Cadiz, Inc. In 2013, the Company entered a long-term lease agreement (the “Lease”) with Cadiz Real Estate, LLC (“Cadiz”), a wholly owned subsidiary of Cadiz, Inc., and currently leases 670 acres located in eastern San Bernardino County, California. The annual base rental is equal to the sum of $ 200 per planted acre and 20 % of gross revenues from the sale of harvested lemons (less operating expenses), not to exceed $ 1,200 per acre per year. In 2016, Cadiz assigned this lease to Fenner Valley Farms, LLC (“Fenner”), a subsidiary of Water Asset Management, LLC (“WAM”). An entity affiliated with WAM is the holder of 9,300 shares of the Company's Series B-2 convertible preferred stock. Upon the adoption of ASC 842, the Company recorded a ROU asset and corresponding lease liability. (6) Colorado River Growers, Inc. (“CRG”) - The Company has representation on the board of directors of CRG, a non-profit cooperative association of fruit growers engaged in the agricultural harvesting business in Yuma County, Arizona. The Company paid harvest expense to CRG, provided harvest management and administrative services to CRG and had a receivable due from CRG for such services. (7) Yuma Mesa Irrigation and Drainage District (“YMIDD”) - The Company has representation on the board of directors of YMIDD. The Company purchased water from YMIDD and had amounts payable to them for such purchases. (8) FGF - The Company advances funds to FGF for fruit purchases, which are recorded as an asset until the sales occur and the remaining proceeds become due to FGF. Additionally, FGF provided farming, packing, by-product processing and administrative services to Trapani Fresh. The Company had a receivable from FGF for lemon sales and the sale of packing supplies and a payable due to FGF for fruit purchases and services. Effective March 1, 2021, Trapani Fresh sells the lemons it grows to FGF, who packs, markets, and sells the fruit to its export customers. The Company also records revenue related to the licensing of intangible assets to FGF. (9) LLCB - Refer to Note 5 - Real Estate Development. (10) Freska - A member of the Company's board of directors is a majority shareholder of Freska Produce International, LLC ("Freska"). The Company had avocado sales to Freska and a corresponding receivable for such sales. (11) Third party growers - A member of the Company's board of directors markets lemons through the Company and the Company had payments due to the member for such lemon procurement. 14. Income Taxes The effective tax rate for the nine months ended July 31, 2021 was higher than the federal statutory tax rate of 21% mainly due to foreign jurisdictions which are taxed at different rates, state taxes, and nondeductible tax items. The Company has no material uncertain tax positions as of July 31, 2021. The Company recognizes interest expense and penalties related to income tax matters as a component of income tax expense. There was no accrued interest or penalties associated with uncertain tax positions as of July 31, 2021. 15. Retirement Plans The Limoneira Company Retirement Plan (the “Plan”) is a noncontributory, defined benefit, single employer pension plan, which provides retirement benefits for all eligible employees. Benefits paid by the Plan are calculated based on years of service, highest five-year average earnings, primary Social Security benefit and retirement age. Effective June 2004, the Company froze the Plan and no additional benefits accrued to participants subsequent to that date. The Plan is funded consistent with the funding requirements of federal law and regulations. There were no funding contributions during the nine months ended July 31, 2021 and 2020. 22 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 15. Retirement Plans (continued) The components of net periodic pension cost for the Plan for the three and nine months ended July 31, 2021 and 2020 were as follows (in thousands): Three Months Ended July 31, Nine Months Ended July 31, 2021 2020 2021 2020 Administrative expenses $ 70 $ 70 $ 208 $ 209 Interest cost 137 160 412 481 Expected return on plan assets ( 236 ) ( 248 ) ( 708 ) ( 743 ) Prior service cost 11 11 33 33 Recognized actuarial loss 185 184 553 554 Net periodic benefit cost $ 167 $ 177 $ 498 $ 534 16. Commitments and Contingencies The Company is from time to time involved in various lawsuits and legal proceedings that arise in the ordinary course of business. At this time, the Company is not aware of any pending or threatened litigation against it that it expects will have a material adverse effect on its business, financial condition, liquidity, or operating results. Legal claims are inherently uncertain, however, and it is possible that the Company’s business, financial condition, liquidity and/or operating results could be adversely affected in the future by legal proceedings. 17. Stock-based Compensation and Treasury Stock Stock-based Compensation The Company has a stock-based compensation plan (the “Stock Plan”) that allows for the grant of common stock of the Company to members of management, key executives and non-employee directors. The fair value of such awards is based on the fair value of the Company’s stock on the date of grant and all are classified as equity awards. Performance Awards Certain restricted stock grants are made to management each December under the Stock Plan based on the achievement of certain annual financial performance and other criteria achieved during the previous fiscal year (“Performance Awards”). The performance grants are based on a percentage of the employee’s base salary divided by the stock price on the grant date once the performance criteria has been met, and generally vest over a two-year period as service is provided. There were no shares of common stock granted to management under the Stock Plan for fiscal year 2020 performance because the financial performance and other criteria were not met. Executive Awards Certain restricted stock grants are made to key executives under the Stock Plan (“Executive Awards”). These grants generally vest over a three to five-year period as service is provided. During December 2020, the Company granted 95,000 shares of common stock with a per share price of $ 15.26 to key executives under the Stock Plan. The related compensation expense of approximately $ 1,450,000 will be recognized equally over the next three years as the shares vest. Director Awards The Company issues shares of common stock to non-employee directors under the Stock Plan on an annual basis that vest upon grant (“Director Awards”). During January 2021 and 2020, 27,815 and 17,841 shares, respectively, of common stock were granted as Director Awards. The Company recognized $ 469,000 and $ 358,000 of stock-based compensation to non-employee directors during the nine months ended July 31, 2021 and 2020, respectively. 23 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 17. Stock-based Compensation and Treasury Stock (continued) Stock-based Compensation (continued) Director Awards (continued) During the three months ended January 31, 2021 and 2020, members of management exchanged 46,993 and 11,314 shares, respectively, of common stock with fair values of $ 701,000 and $ 213,000 , respectively, at the date of the exchanges, for the payment of payroll taxes associated with the vesting of shares under the Company’s stock-based compensation programs. Treasury Stock Share Repurchase Program On March 12, 2020, the Board of Directors of the Company approved a share repurchase program authorizing the Company to repurchase up to $ 10,000,000 of its outstanding shares of common stock through March 2021. During fiscal year 2020, the Company repurchased 250,977 shares under the share repurchase program for approximately $ 3,493,000 . This program expired in March 2021. 18. Segment Information The Company operates in four reportable operating segments: fresh lemons, lemon packing, avocados and other agribusiness. The reportable operating segments of the Company are strategic business units with different products and services, distribution processes and customer bases. The fresh lemons segment includes sales, farming and harvesting expenses and third-party grower costs relative to fresh lemons. The lemon packing segment includes packing revenues and shipping and handling revenues relative to lemon packing. The lemon packing segment expenses are comprised of lemon packing costs. The lemon packing segment revenues include intersegment revenues between fresh lemons and lemon packing. The intersegment revenues are included gross in the segment note and a separate line item is shown as an elimination. The avocados segment includes sales, farming and harvest costs. The other agribusiness segment includes sales, farming and harvest costs of oranges, specialty citrus and other crops. Revenues related to rental operations are included in “Corporate and Other.” Other agribusiness revenues consisted of oranges of $ 1,981,000 and $ 4,476,000 and specialty citrus and other crops of $ 1,065,000 and $ 4,089,000 for the three and nine months ended July 31, 2021, respectively. Other agribusiness revenues consisted of oranges of $ 2,232,000 and $ 7,171,000 and specialty citrus and other crops of $ 788,000 and $ 3,832,000 for the three and nine months ended July 31, 2020, respectively. The Company does not separately allocate depreciation and amortization to its fresh lemons, lemon packing, avocados and other agribusiness segments. No asset information is provided for reportable operating segments, as these specified amounts are not included in the measure of segment profit or loss reviewed by the Company’s chief operating decision maker. The Company measures operating performance, including revenues and operating income, of its operating segments and allocates resources based on its evaluation. The Company does not allocate selling, general and administrative expense, total other income (expense) and income taxes, or specifically identify them to its operating segments. The Company earns packing revenue for packing lemons grown on its orchards and lemons procured from third-party growers. Intersegment revenues represent packing revenues related to lemons grown on the Company’s orchards. Segment information for the three months ended July 31, 2021 (in thousands): Fresh Lemons Lemon Packing Eliminations Avocados Other Agribusiness Total Agribusiness Corporate and Other Total Revenues from external customers $ 36,295 $ 4,540 $ — $ 4,073 $ 3,046 $ 47,954 $ 1,171 $ 49,125 Intersegment revenue — 7,192 ( 7,192 ) — — — — — Total net revenues 36,295 11,732 ( 7,192 ) 4,073 3,046 47,954 1,171 49,125 Costs and expenses 31,846 9,279 ( 7,192 ) 2,708 1,956 38,597 4,717 43,314 Depreciation and amortization — — — — — 2,094 343 2,437 Operating income (loss) $ 4,449 $ 2,453 $ — $ 1,365 $ 1,090 $ 7,263 $ ( 3,889 ) $ 3,374 24 LIMONEIRA COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 18. Segment Information (continued) Segment information for the three months ended July 31, 2020 (in thousands): Fresh Lemons Lemon Packing Eliminations Avocados Other Agribusiness Total Agribusiness Corporate and Other Total Revenues from external customers $ 39,459 $ 3,775 $ — $ 6,133 $ 3,020 $ 52,387 $ 1,172 $ 53,559 Intersegment revenue — 16,330 ( 16,330 ) — — — — — Total net revenues 39,459 20,105 ( 16,330 ) 6,133 3,020 52,387 1,172 53,559 Costs and expenses 39,694 15,988 ( 16,330 ) 2,537 2,666 44,555 4,633 49,188 Depreciation and amortization — — — — — 2,271 286 2,557 Operating (loss) income $ ( 235 ) $ 4,117 $ — $ 3,596 $ 354 $ 5,561 $ ( 3,747 ) $ 1,814 Segment information for the nine months ended July 31, 2021 (in thousands): Fresh Lemons Lemon Packing Eliminations Avocados Other Agribusiness Total Agribusiness Corporate and Other Total Revenues from external customers $ 98,195 $ 15,540 $ — $ 6,780 $ 8,565 $ 129,080 $ 3,452 $ 132,532 Intersegment revenue — 23,159 ( 23,159 ) — — — — — Total net revenues 98,195 38,699 ( 23,159 ) 6,780 8,565 129,080 3,452 132,532 Costs and expenses 89,982 29,684 ( 23,159 ) 4,141 6,832 107,480 17,444 124,924 Depreciation and amortization — — — — — 6,591 899 7,490 Operating income (loss) $ 8,213 $ 9,015 $ — $ 2,639 $ 1,733 $ 15,009 $ ( 14,891 ) $ 118 Segment information for the nine months ended July 31, 2020 (in thousands): Fresh Lemons Lemon Packing Eliminations Avocados Other Agribusiness Total Agribusiness Corporate and Other Total Revenues from external customers $ 100,231 $ 11,752 $ — $ 8,323 $ 11,003 $ 131,309 $ 3,477 $ 134,786 Intersegment revenue — 31,889 ( 31,889 ) — — — — — Total net revenues 100,231 43,641 ( 31,889 ) 8,323 11,003 131,309 3,477 134,786 Costs and expenses 101,006 34,925 ( 31,889 ) 4,571 9,990 118,603 18,113 136,716 Depreciation and amortization — — — — — 6,715 840 7,555 Operating (loss) income $ ( 775 ) $ 8,716 $ — $ 3,752 $ 1,013 $ 5,991 $ ( 15,476 ) $ ( 9,485 ) 19. Subsequent Events The Company has evaluated events subsequent to July 31, 2021 through the date of this filing, to assess the need for potential recognition or disclosure in this Quarterly Report on Form 10-Q. Based upon this evaluation, except as described in the notes to the interim consolidated financial statements, it was determined that no other subsequent events occurred that require recognition or disclosure in the unaudited consolidated financial statements. 25